The Modern Market at Lloyd's

A Video Explaining The Underwriters at Lloyd's, London

The market at Lloyd’s is a place where groups of individuals and corporations can transact insurance. After hundreds of years, it has developed a strict method of placing insurance. It has been described as follows:

The Corporation of Lloyd’s never sells insurance itself and is not at risk on the insurance sold on the floor at Lloyd’s. Rather, the underwriter members subscribe to cover all or part of a proposed placement of insurance, at their own election. Numbers of individual underwriters, many in England but others scattered throughout the world, have joined together to form syndicates. Syndicates may have anywhere from two or three to hundreds of members. The individual members are known as the “names” on that syndicate. These syndicates are the entities which subscribe on behalf of their members to cover risks and percentage parts of risks. The actual potential liability of a given name depends upon his percentage share of the syndicate of which he is a member, as well as the percentage of the risk to which his syndicate has subscribed.

Lloyd’s is now the market of last resort; unlike other insurers, Lloyd’s offers sufficient affordable insurance against almost any risk. The Lloyd’s system is so successful that it has been imitated worldwide. Exchanges or markets have been opened in Illinois, New York, and Florida, none of which has even approached the success of Lloyd’s.

Lloyd’s also reinsures (insures the insurance issued by insurers) almost every insurer in business.

Most Names or investors do not actively participate in the insurance market on a day to day basis … Rather, the business of insuring risk at Lloyd’s is carried on by groups of Names called “Syndicates.” … In order to increase the efficiency of underwriting risks, a group of Names will, for a given operating year, form a “Syndicate” which will in turn subscribe to policies on behalf of all Names in the Syndicate. … A typical Lloyd’s policy has multiple Syndicates which collectively are responsible for 100 percent of the coverage provided by a policy. … The Syndicates themselves have been said to have no independent legal identity. … Thus, a Syndicate is a creature of administrative convenience through which individual investors can subscribe to a Lloyd’s policy. A Syndicate bears no liability for the risk on a Lloyd’s policy. Rather, all liability is born by the individual Names who belong to the various Syndicates that have subscribed to a policy.

ZALMA OPINION

The Lloyd's marketplace is considered a market of last resort because almost any risk can be covered by some underwriters at Lloyd's. It is more important, however, because of its history and impact on insurance as it is written and operates today. It is important to understand the Lloyd's market to understand how insurance works.

I will be taking a short break from publishing my blog but will be back soon.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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